# C_2007140EN.01001201.xml

| 23.6.2007 | EN | Official Journal of the European Union | C 140/12 |
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23.6.2007

EN

Official Journal of the European Union

C 140/12

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Action brought on 30 March 2007 — Commission of the European Communities v Italian Republic

(Case C-174/07)

(2007/C 140/20)

Language of the case: Italian

Parties

Applicant: Commission of the European Communities (represented by: E. Traversa and M. Afonso, acting as Agents)

Applicant:

Defendant: Italian Republic

Defendant:

Form of order sought

| — | declare that, by extending by Article 2(44) of Law No 350 of 24 December 2003 (2004 Finance Law) to 2002 the tax amnesty provided for in Articles 8 and 9 of Law No 289 of 27 December 2002 (2003 Finance Law), and providing expressly and in a general manner that assessment of taxable transactions effected in the 2002 tax period is to be abandoned, the Italian Republic has failed to fulfil its obligations under Article 2(1)(a)(c) and (d) and Articles 193 to 273 of Title XI of Council Directive 2006/112/EC (1) of 28 November 2006 on the common system of value added tax, which from 1 January 2007 repealed and replaced Articles 2 and 22 of Sixth Council Directive 77/388/EEC (2) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment; |
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declare that, by extending by Article 2(44) of Law No 350 of 24 December 2003 (2004 Finance Law) to 2002 the tax amnesty provided for in Articles 8 and 9 of Law No 289 of 27 December 2002 (2003 Finance Law), and providing expressly and in a general manner that assessment of taxable transactions effected in the 2002 tax period is to be abandoned, the Italian Republic has failed to fulfil its obligations under Article 2(1)(a)(c) and (d) and Articles 193 to 273 of Title XI of Council Directive 2006/112/EC (1) of 28 November 2006 on the common system of value added tax, which from 1 January 2007 repealed and replaced Articles 2 and 22 of Sixth Council Directive 77/388/EEC (2) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment;

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| — | order the Italian Republic to pay the costs. |
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order the Italian Republic to pay the costs.

Pleas in law and main arguments

| 1. | The Commission points out that the Community legislature imposed a twofold obligation on Member States consisting not only in adopting all legislative measures required under national law to implement the Sixth VAT Directive but also in adopting all administrative measures necessary to ensure that taxable persons liable to VAT comply with the obligations arising under the Sixth Directive, primarily the obligation to pay the tax due as a result of effecting taxable transactions spanning a certain period of time. It would not have made any sense for the Community legislature to have provided for the harmonisation of VAT, nor would it have served any practical purpose, if national fiscal authorities were not required to implement a system of assessment and monitoring intended to ensure ‘the collection of taxes in a uniform manner in all Member States’, as stated in the fourteenth recital in the preamble to the Sixth Directive. |
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The Commission points out that the Community legislature imposed a twofold obligation on Member States consisting not only in adopting all legislative measures required under national law to implement the Sixth VAT Directive but also in adopting all administrative measures necessary to ensure that taxable persons liable to VAT comply with the obligations arising under the Sixth Directive, primarily the obligation to pay the tax due as a result of effecting taxable transactions spanning a certain period of time. It would not have made any sense for the Community legislature to have provided for the harmonisation of VAT, nor would it have served any practical purpose, if national fiscal authorities were not required to implement a system of assessment and monitoring intended to ensure ‘the collection of taxes in a uniform manner in all Member States’, as stated in the fourteenth recital in the preamble to the Sixth Directive.

| 2. | The rules introduced by Articles 8 and 9 of Italian Law No 289/2002 went far beyond the bounds of administrative discretion conferred on the Member States by the Community legislature. In fact, instead of using that discretion to achieve more effective fiscal monitoring, by the above-mentioned law, the Italian State truly abandoned in a general, indiscriminate and preventive manner all forms of VAT assessment and verification, and is thus in direct breach of the requirements under Article 22 of the Sixth Directive and, as a consequence, of the general obligation under Article 2 to subject all taxable transactions to VAT. The Italian legislature has given all taxable persons liable to VAT and subject to its fiscal competence the possibility of bypassing entirely any form of fiscal control in relation to a series of tax years. A taxable person may acquire such a significant benefit by the payment of an amount calculated according to a standard method which no longer has any connection with the amount of VAT that would have been payable in respect of the cost of supplies of goods or services effected by the taxable person in the relevant tax year. |
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The rules introduced by Articles 8 and 9 of Italian Law No 289/2002 went far beyond the bounds of administrative discretion conferred on the Member States by the Community legislature. In fact, instead of using that discretion to achieve more effective fiscal monitoring, by the above-mentioned law, the Italian State truly abandoned in a general, indiscriminate and preventive manner all forms of VAT assessment and verification, and is thus in direct breach of the requirements under Article 22 of the Sixth Directive and, as a consequence, of the general obligation under Article 2 to subject all taxable transactions to VAT. The Italian legislature has given all taxable persons liable to VAT and subject to its fiscal competence the possibility of bypassing entirely any form of fiscal control in relation to a series of tax years. A taxable person may acquire such a significant benefit by the payment of an amount calculated according to a standard method which no longer has any connection with the amount of VAT that would have been payable in respect of the cost of supplies of goods or services effected by the taxable person in the relevant tax year.

| 3. | A particularly striking example of this radical ‘separation’ between the tax liability that is calculated as being payable in accordance with normal VAT rules and the ‘quantum’ payable to qualify for the ‘graveyard amnesty’ is to be found in the case of a taxable person who has failed to file any tax return at all. The taxable person can regularise his position in respect of each tax year by a payment of Euro 1 500 in the case of a natural person or Euro 3 000 in the case of a company. A further example of the total absence of any link with the basis of assessment of transactions effected (but not declared) is to be found in the rules governing the ‘graveyard’ amnesty, which may be procured by submitting a supplementary statement. The amount payable by a taxpayer wishing to take advantage of the amnesty is calculated as a percentage (2 %) to be applied to the VAT that would have been payable in respect of the supply of goods or services effected in each tax year (or the VAT improperly deducted in respect of purchases in the same tax year). |
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3.

A particularly striking example of this radical ‘separation’ between the tax liability that is calculated as being payable in accordance with normal VAT rules and the ‘quantum’ payable to qualify for the ‘graveyard amnesty’ is to be found in the case of a taxable person who has failed to file any tax return at all. The taxable person can regularise his position in respect of each tax year by a payment of Euro 1 500 in the case of a natural person or Euro 3 000 in the case of a company. A further example of the total absence of any link with the basis of assessment of transactions effected (but not declared) is to be found in the rules governing the ‘graveyard’ amnesty, which may be procured by submitting a supplementary statement. The amount payable by a taxpayer wishing to take advantage of the amnesty is calculated as a percentage (2 %) to be applied to the VAT that would have been payable in respect of the supply of goods or services effected in each tax year (or the VAT improperly deducted in respect of purchases in the same tax year).

| 4. | Such a general and preventive abandonment of any means of VAT verification is likely seriously to distort the proper functioning of the common VAT system. In particular, it would undermine the principle of fiscal neutrality, which precludes the different VAT treatment of traders effecting the same transactions. Any exception to the rule that VAT should be levied and collected effectively would result, on the one hand, in inflicting serious damage to the detriment of both Italian undertakings and those in other Member States which are subject to ordinary value added tax rules and, on the other hand, in seriously undermining the principle of ‘fair competition’ within the common market, set out in the fourth recital in the Sixth Directive. |
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4.

Such a general and preventive abandonment of any means of VAT verification is likely seriously to distort the proper functioning of the common VAT system. In particular, it would undermine the principle of fiscal neutrality, which precludes the different VAT treatment of traders effecting the same transactions. Any exception to the rule that VAT should be levied and collected effectively would result, on the one hand, in inflicting serious damage to the detriment of both Italian undertakings and those in other Member States which are subject to ordinary value added tax rules and, on the other hand, in seriously undermining the principle of ‘fair competition’ within the common market, set out in the fourth recital in the Sixth Directive.

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(1)  OJ L 347 of 13.6.1977, p. 1.

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(2)  OJ L 145 of 11.12.2006, p. 1.

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